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Short explanation of contract curve
A set of points that highlight the final distribution of 2 different items that take place between 2 individuals on a mutually advantageous trading prospect is called a contract curve. This curve can also be called Pare to efficient points’ subset that can be attained by trading. This trade is related to holding of goods (2 in quantity).
You can know more about contract curve and the reason why connection at initial points on Edgeworth Box is mandatory for contract curve in our contract curve assignment help manual.
Indifference Curve Analysis and its utilizations
Indifferent curve is also an important part when explaining about contract curve. This curve is helpful in clarifying various issues. Some of them are:
Representation of contract curve and Edgeworth box for 2substitutes
When you consider 2perfect substitutes, you will have indifference curves to have straight lines. This can only be possible when they have similar slopes. In case of different slopes, there are chances of the indifferent curves of not having tangency. You will also see that at endowment point, the curves of both goods intersect.This showcases a trade process which will continue until every good is exhausted.This in finality will lead to a corner solution.
When you go through our contract curve homework help manual, you will read about there presentation of both cases of perfect substitutes with elucidated explanation.
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